This research examines the role played by Open Access entry as a strategy for
promoting competition in UK rail freight markets. The theoretical basis for such an
investigation is that associated with contestable markets in Economics and more
specifically in the promotion of competition in related markets.
The overall aims of the research are to first understand the contestability of the UK rail
freight market against the background of its underlying market conditions. Secondly,
the research compares the experience of Open Access rail freight operators in an
international context in order to confirm or reject the explanatory relevance of key
variables, as postulated by economists.
The research aims have been satisfied in each case through the attainment of a number
of specific objectives. These objectives include gaining a wider understanding of the
theory of contestable markets, identifying and evaluating a range of barriers to entry
faced by Open Access operators (and the strategies they have employed to overcome
them), and an appreciation of the factors and processes that determine Open Access
activity.
The qualitative line of enquiry adopted by the research has produced a review of
relevant literature sources and a series of preliminary interviews with industry experts.
The former facilitated an in - depth understanding of the characteristics of UK rail
freight markets and of the theory of contestability, with a priori reasoning being
employed to highlight key issues and controversies. The interviews with key industry
experts formed the basis for a subsequent questionnaire survey of members of the Rail
Freight Group and other rail industry members. Although most respondents believed
that a significant number of barriers to entry existed (with EW&S' first choice over
traction being regarded as the most important both in terms of citations and barrier
height), 68% of those surveyed thought that there would be some Open Access entry
in the first eighteen months after the privatisation of British Rail's trainload freight
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operations. Sub - contracting of rail haulage was regarded as the most likely modus
operandi for new market entrants.
This survey was followed up by case studies of the first two instances of Open Access
entry (National Power and BNFL), which had both shown considerable interest in the
issues raised by the earlier industry survey. These case studies resulted in the
identification of a range of similarities and contrasts in barriers encountered and entry
strategies, and provided valuable information about the rail freight operations of the
two companies.
Further analysis has compared entry in an international context and identified strategies
that could complement existing practice in the UK. For this purpose, an analytical
framework based on a number of themes of Open Access is adopted. Perceptions of
regulatory effectiveness in promoting contestable outcomes are also established
through a series of in - depth interviews with key industry players.
The research project has generated a number of successful outcomes relating to its
aims. Markets are not contestable and contestability should not be regarded as an
appropriate framework for analysing industry behaviour. This outcome is the result of
an awareness of those factors representing barriers to entry and of those structural
complexities accounting for a lack of Open Access entry. An understanding of the
relative significance of entry barriers and of strategies adopted by operators has also
been achieved, along with awareness of those factors and strategies regarded by them
as important.
The extent to which certain Open Access variables retain their explanatory power in a
global context and the scope for utilising entry strategies used elsewhere (such as short
- lines) has also been established, along with an awareness of the opinions of key
industry players as to the effectiveness of regulatory intervention in the promotion of
greater contestability.
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Overall, this research project has provided valuable insight into the likelihood of Open
Access competition in rail freight markets. In addition, it has led to a recognition of
the considerable opportunities that now exist for further work on Open Access entry in
rail freight markets, both domestically and internationally.